RBI Refuses FII Status to FDI in Real Estate

April 23, 2007	(Be the first to rate this story!)  Loading ...
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Foreign Direct investments (FDI) received by property developers through private placement of equity has been denied the FII status. And the government has no issues with such a decision of the Reserve Bank of India.

Since an element of discretion was present in pre-IPO private placement, it cannot be regarded the same as other portfolio investment and must comply the FDI norms. Also, the Department of Industrial Policy and Promotion (DIPP) in the commerce and industry Ministry has decided to go with the RBI’s view.

All the real estate companies bringing FDI through private placement require following the guidelines of DIPP.

Most real estate companies, which want to make a killing on the investors’ increasing craze for real estate stocks, have been looking forward to FII status for their pre-offer placements to give a push to their construction projects that do not meet tough FDI norms.

Both the Finmin and RBI are trying hard to put a cap on the exposure of banks to property market, which continues to woo credit.

State owned banks have been asked to re-balance portfolios and moderate credit growth to what the RBI calls high risk sectors like commercial real estate. Also, SEBI has also tightened the norms for real estate IPOs.

News Published Under:   Banking and Finance |

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